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Nortel Networks has cut its revenue forecast for the third quarter and said it will need to cut costs more than expected in order to break even.

Citing continued reductions in spending by carriers, especially in the USA, the telecommunications and networking infrastructure vendor said it expects revenue in the third quarter of 2003 to be lower than third quarter 2001 revenue by about 10%. It previously had predicted revenue would be flat year-on-year.

Nortel still expects to break even by the end of June 2003 but to reach that goal it plans to cut its quarterly cost structure to less than $2.6bn (£1.7bn), down from a previously stated goal of approximately $3.2bn (£2.1bn). Those figures do not include costs related to acquisitions or special charges or gains.

To cut costs the company plans to simplify the structure of its businesses and create a more direct connection between its operations and customer-facing teams. The cost-cutting efforts will result in additional charges for workforce reductions and facilities closures. Details are still being worked out and will be revealed with the company's third-quarter results.

Nortel had previously announced plans to cut its workforce to 42,000 by the end of September and now plans an additional 7,000 job cuts, Nortel UK spokesman Ben Atherton said. Nortel expects the restructuring activity to be substantially completed by the end of 2002, at which point the company will have a workforce of about 35,000.

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